Marchant Ltd. reported the following abbreviated statement of financial position and statement of income for 2024.MARCHANT LTD.Comparative Statement of Financial Position Dec. 31, 2024Dec. 31, 2023Cash$ 60,000$ 70,000Accounts receivable120,000140,000Inventory320,000280,000Property, plant, and equipment700,000650,000Less: Accumulated depreciation (260,000) (230,000)Total assets$940,000$910,000Accounts payable$ 82,000$ 85,000Wages payable8,00010,000Loan payable350,000400,000Common shares200,000150,000Retained earnings 300,000 265,000Total liabilities and shareholders’ equity$940,000$910,000MARCHANT LTD.Statement of IncomeFor the year ended December 31, 2024Sales revenue $450,000Cost of goods sold 240,000Gross profit 210,000Other expenses: Supplies expense$ 15,000 Depreciation expense30,000 Wages expense100,000 Other operating expenses5,000 Interest expense 24,000 174,000 36,000Other income 8,000Net income $ 44,000RequiredPrepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024, using the indirect method.Determine the cash flows from operating activities using the direct method.Was the cash flow generated by the company’s operating activities during the year larger or smaller than the net income? Should these two amounts be the same? Explain.Was the change in the amount of working capital during the year the same amount as cash from operating activities? Should these two amounts be the same? Explain. (Hint: Working capital = current assets − current liabilities.) AP5-9B (Preparation of statement of cash flows) Marchant Ltd. reported the followingabbreviated statement of financial position and statement of income for 2024.MARCHANT LTD.Comparative Statement of Financial PositionCashAccounts receivableInventoryProperty, plant, and equipmentLess: Accumulated depreciationTotal assetsAccounts payableWages payableLoan payableCommon sharesRetained earningsTotal liabilities and shareholders'equityDec. 31,2024$ 60,000120,000320,000700,000(260,000)$940,000$ 82,0008,000350,000200,000300,000$940,000Dec. 31,2023$70,000140,000280,000650,005(230,000)$910,000$ 85,00010,000400,000150,000265,000$910,000 MARCHANT LTD.Statement of IncomeFor the year ended December 31, 2024Sales revenueCost of goods soldGross profitOther expenses:Supplies expenseDepreciation expenseWages expenseOther operating expensesInterest expenseOther incomeNet income$ 15,00030,000100,0005,00024,000$450,000240,000210,000174,00036,0008,000$44,000Requireda. Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024,using the indirect method.b. Determine the cash flows from operating activities using the direct method.c. Was the cash flow generated by the company's operating activities during the year larger orsmaller than the net income? Should these two amounts be the same? Explain.d. Was the change in the amount of working capital during the year the same amount as cashfrom operating activities? Should these two amounts be the same? Explain. (Hint: Workingcapital = current assets - current liabilities.)

The cash flow statement is prepared using either the indirect method or the direct method. The cash…

Answered: AP5-9B (Preparation of statement of…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Marchant Ltd. reported the following abbreviated statement of financial position and statement of income for 2024. MARCHANT LTD. Comparative Statement of Financial Position Dec. 31, 2024 Dec. 31, 2023 Cash $ 60,000 $ 70,000 Accounts receivable 120,000 140,000 Inventory 320,000 280,000 Property, plant, and equipment 700,000 650,000 Less: Accumulated depreciation (260,000) (230,000) Total assets $940,000 $910,000 Accounts payable $ 82,000 $ 85,000 Wages payable 8,000 10,000 Loan payable 350,000 400,000 Common shares 200,000 150,000 Retained earnings 300,000 265,000 Total liabilities and shareholders’ equity $940,000 $910,000 MARCHANT LTD. Statement of Income For the year ended December 31, 2024 Sales revenue $450,000 Cost of goods sold 240,000 Gross profit 210,000 Other expenses: Supplies expense $ 15,000 Depreciation expense 30,000 Wages expense 100,000 Other operating expenses 5,000 Interest expense 24,000 174,000 36,000 Other income 8,000 Net income $ 44,000 Required Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024, using the indirect method. Determine the cash flows from operating activities using the direct method. Was the cash flow generated by the company’s operating activities during the year larger or smaller than the net income? Should these two amounts be the same? Explain. Was the change in the amount of working capital during the year the same amount as cash from operating activities? Should these two amounts be the same? Explain. (Hint: Working capital = current assets − current liabilities.)

AP5-9B (Preparation of statement of cash flows) Marchant Ltd. reported the following
abbreviated statement of financial position and statement of income for 2024.
MARCHANT LTD.
Comparative Statement of Financial Position
Cash
Accounts receivable
Inventory
Property, plant, and equipment
Less: Accumulated depreciation
Total assets
Accounts payable
Wages payable
Loan payable
Common shares
Retained earnings
Total liabilities and shareholders'
equity
Dec. 31,
2024
$ 60,000
120,000
320,000
700,000
(260,000)
$940,000
$ 82,000
8,000
350,000
200,000
300,000
$940,000
Dec. 31,
2023
$70,000
140,000
280,000
650,005
(230,000)
$910,000
$ 85,000
10,000
400,000
150,000
265,000
$910,000

MARCHANT LTD.
Statement of Income
For the year ended December 31, 2024
Sales revenue
Cost of goods sold
Gross profit
Other expenses:
Supplies expense
Depreciation expense
Wages expense
Other operating expenses
Interest expense
Other income
Net income
$ 15,000
30,000
100,000
5,000
24,000
$450,000
240,000
210,000
174,000
36,000
8,000
$44,000
Required
a. Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024,
using the indirect method.
b. Determine the cash flows from operating activities using the direct method.
c. Was the cash flow generated by the company's operating activities during the year larger or
smaller than the net income? Should these two amounts be the same? Explain.
d. Was the change in the amount of working capital during the year the same amount as cash
from operating activities? Should these two amounts be the same? Explain. (Hint: Working
capital = current assets - current liabilities.)

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